A clean-tech start-up that thinks it has solved a problem that has vexed engineers for decades–how to effectively store energy generated by wind and sunshine–has gained some heavyweight financial backers.

Danielle Fong and her co-founders are attempting to solve a problem that has long bedeviled engineers.

An investment group that includes Bill Gates and Peter Thiel, the co-founder of PayPal and the first outside investor in Facebook Inc., has poured $37.3 million into LightSail Energy, a three-year-old start-up dreamed up by a Princeton graduate school dropout. Thiel led the investment.

Danielle Fong, now 25, said it took LightSail about a year to raise the Series D funding because investors are more wary of clean technology since solar power company Solyndra spectacularly failed in 2011. Solyndra burned through nearly $1 billion from private investors and more than $500 million in Department of Energy loans before declaring bankruptcy.

LightSail has found investors “who can truly think for themselves,” she said.

While wind produces energy when it’s blowing and the sun when it’s shining, storing renewable energy in large quantities, for ongoing use, is tricky. Common approaches have included electrochemical batteries, mechanical devices such as flywheels, and liquefied air.

“The overall problem of how to store large amounts of energy is one we’ve been working on for a century without a lot of success,” said co-founder and Chief Executive Steve Crane. “We’re good at cell phone and laptop batteries and maybe scaling to run cars, but that’s as far as we’ve gone successfully up to now.”

Fong, who at the time she co-founded the company had dropped out of a Ph.D. program at Princeton University that she began when she was 17, began thinking that water and compressed air could be combined to solve the energy storage problem. Water spray, because of its high surface area and heat capacity, would work extremely well as a heat exchanger, she reasoned.

By spraying water droplets into the air as it compresses in a technique called isothermal compression, the droplets absorb most of the heat, so that the air’s temperature doesn’t change much and most of the energy is still available. The water is then separated from the air and recycled.

LightSail Energy

Prototype energy-storage system made by LightSail Energy.

The founding team ripped up an old firehouse in Oakland, Calif., so they could install pipes and build a prototype of a reversible system that stores and releases energy by compressing and expanding air.

There are hurdles to LightSail’s approach–water droplets, for instance, need to be the right size and volume, and they need to be pumped in without using too much energy.

Another risk of isothermal compression is that water can get trapped inside a cylinder, in a condition called hydrolock, and cause the cylinder to explode, Crane said. But these problems haven’t occurred with LightSail’s technology, he said.

The technology intrigued Gates, the Microsoft co-founder who is a limited partner in Khosla Ventures, a LightSail backer since 2009. Thiel, who created controversy last year when he declared at a TechCrunch conference in San Francisco that clean-tech was a “disaster,” was also convinced.

In a statement, Thiel said that “it’s time to find honest companies that can develop technologies that stand on real innovation instead of the backs of taxpayers.”

Two competitors, General Compression and SustainX, are also working on technology that uses compressed air to store energy. Both companies have received funding from the U.S. Department of Energy. Crane said LightSail was rejected in its bid for Department of Energy funding, though he wouldn’t rule out pursuing government funding in the future.

LightSail is now in talks with potential customers, which include solar and wind developers and large industrial companies that want more control over their power supplies, Crane said. Over time, he said, the technology should cease to be exotic and will become “mainstream, grid-scale energy technology.”

First, though, the company has to ship products. LightSail’s website depicts them as air storage tanks with power units that can fit inside shipping containers. They are now likely due in 2014.

LightSail has raised a total of $52.3 million. Other financial backers include Innovacorp and individual investors. Valuation is not disclosed.

UPDATE: This story was corrected to clarify that Bill Gates and Peter Thiel invested as individuals, not through their investment vehicles. One incorrect reference to CEO Steve Crane was also changed.

SECOND UPDATE: This story was corrected to clarify technical aspects of LightSail’s technology, specifically the need to pump in water droplets without using too much energy.

Write to Deborah Gage at deborah.gage@dowjones.com. Follow her on Twitter at @deborahgage

Comments (5 of 13)

I have a better idea...
I've thought about this since 1979 while staitioned in Germany...
Without telling all...
My idea consists of a generator in every home powered by a system of weights that would make use
of the gravitaional pull of the earth...it works in my mind yet I have never had the resources to actually
put one together...the only encouragement I've had with this idea was from a friend who has degrees in
mathmatics...this same friend helped Neil Armstrong get to the moon by being a member of the team that figured the trajectory from earth to moon... 'nough said!
Thanks for any attention you give to this idea...
Norm

3:42 am December 18, 2012

Keef Wivanef wrote:

"Danielle Fong wrote :
Hi Bob,

You’re correct in pointing out that that’s the missing information, but the trouble is that, until we have a tested product that’s run for months and available for production at scale, we won’t have proven our cost or efficiency targets.

The point, however, and the reason we were able to raise money from such astute investors, was that we do have a credible plan to product extraordinarily inexpensive energy storage systems, with high efficiency. 70% efficiency should be possible, though perhaps not with our very first product.

In our models, our targets actually outcompete pumped hydro, but most importantly they outcompete traditional peakers based on diesel or natural gas (away from the states).

Danielle Fong"

Yeah yeah.....coming real soon...send MUNNY

What a crock of plop

What are your scientific qualifications again?

I'M a little teapot!

3:04 pm November 24, 2012

Stan Vejtasa, Ph.D. wrote:

The utility industry through EPRI has been studing Compressed air energy storage (CAES), includig with humidification since the 1980s, a 110 MW plant was built in Alabama. I am shocked that this article did not mention CAES.. Doesn't anyone do their homework any more?

5:02 pm November 20, 2012

Anonymous wrote:

“The overall problem of how to store large amounts of energy is one we’ve been working on for a century without a lot of success”. .. What about pump storage hydro that accounts for more than 99% of bulk storage capacity worldwide with efficiency rates generally between 70 and 80%? Pump storage has been used very successfully for a very long time. How does this technology stack up?

9:05 pm November 8, 2012

John Duong wrote:

I think both government and private funding will continue to be key in helping innovative clean technologies companies like LightSail Energy. It is my own belief that it is strategically important for freedom from fossil fuel energy dependency as well as for a cleaner environment. Key investments in clean tech will help to continue to inspire new innovations and will keep us competitive in the global economy. We need more LightSail Energy like companies. The investment risk is worth it!

About Venture Capital Dispatch

Produced by the editors of Dow Jones VentureWire, Venture Capital Dispatch tracks the fast-moving developments at the intersection of high-tech innovation and venture capital finance. Featuring the VentureWire reporting team in the Silicon Valley, New York, Boston and Shanghai tech centers, Venture Capital Dispatch provides insight into the newest start-ups and latest trends in venture capital investing. Write us at VCdispatch@dowjones.com. For more information on Dow Jones products covering venture capital and other financial markets, go to http://pevc.dowjones.com.